Inf Paper

The 'New Normal' and Its Effects on Supply Chain Management

By Mac Cutchins

Senior managers in many businesses are using the catchphrase "The New Normal" as if it were a prescient view of the way things will be from now on. For those managers this view is unfortunate because their perception of The New Normal suggests a sort of baleful future in which everyone will have to do with less.

In the supply chain management space, the New Normal perception usually translates to "fear driven." And that usually manifests itself in one of two reactions.

Hunkering Down: aka The Ostrich Effect

One response is to hunker down and attempt to minimize capital expenditures. This mindset does not seek opportunities to solve problems; rather, it seeks opportunities to cut back in infrastructure investments. In effect, the executive committees or CEOs are saying, "Our crystal ball is broken. We're now in a new paradigm and we don't know what is going to happen. So, we're going to postpone new projects from quarter to quarter, or else cancel them." But many of these companies are experiencing increases in operating expenses - even though revenues are down or flat - and are leaking cash.

Taking Action

A contrasting response that is also fear driven is when managers recognize that sales are flat, or they are experiencing inventory issues, or should be more efficient. They don't know how long market turbulence is going to last, but know that costs are going up and realize they need to reduce labor or increase efficiency.

These companies are aware of how inefficiency and inaccuracy are damaging their businesses, especially during a recession. Most importantly, they recognize the need to take action.

Rather than bury their heads in the sand and postpone projects, such companies are capable of sensing and responding to changes in demand, especially when the number of orders spike above expectation. They are taking advantage of the extraordinary low cost of capital to invest in...